UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 2002
OR
[ ] Transition report pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____________ to___________
Commission File Number: 001 - 11639
A. Full title of the plan and address of the plan if different from that of
the issuer named below:
LUCENT TECHNOLOGIES INC.
LONG TERM SAVINGS and SECURITY PLAN
B. Name of the issuer of the securities held pursuant to the plan and the
address of its principal executive office:
LUCENT TECHNOLOGIES INC.
600 MOUNTAIN AVENUE
MURRAY HILL, NJ 07974
The total # of pages contained
in this 11-K filing is 17
---------
Exhibit Index can be found on
page 3
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Form 11-K
Lucent Technologies Inc.
Long Term Savings and Security Plan
Index
Report of Independent Accountants
Audited Financial Statements
Notes to Financial Statements
Supplemental Schedule
Signature
Exhibit Index
-2-
Lucent Technologies Inc.
Long Term Savings and
Security Plan
Financial Statements
As of December 31, 2002 and 2001 and for the
Year Ended December 31, 2002 and Supplemental Schedule
As of December 31, 2002
Table of Contents
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Pages
Report of Independent Accountants....................................... 4
Audited Financial Statements:
Statements of Net Assets Available for Benefits As of
December 31, 2002 and 2001.......................................... 5
Statement of Changes in Net Assets Available for Benefits for the
Year Ended December 31, 2002........................................ 6
Notes to Financial Statements............................................ 7 - 12
Supplemental Schedule*:
Schedule H, line 4i - Schedule of Assets (Held at End of Year) As of
December 31, 2002.................................................... 13
* Other schedules required by Section 2520.103-5 have been omitted because
they are not applicable.
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Report of Independent Accountants
To the Lucent Technologies Inc.
Employee Benefits Committee:
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Lucent Technologies Inc. Long Term Savings and Security Plan (the "Plan")
at December 31, 2002 and 2001, and the changes in net assets available for
benefits for the year ended December 31, 2002 in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Plan's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Assets (Held
at End of Year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. This
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ PricewaterhouseCoopers LLP
June 23, 2003
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Lucent Technologies Inc.
Long Term Savings and Security Plan
Statements of Net Assets Available for Benefits
As of December 31, 2002 and 2001
(Thousands of Dollars)
--------------------------------------------------------------------------------
December 31,
2002 December 31, 2001
----------------- ---------------------------------------------------------
Participant Participant Non-Participant
Directed Directed Directed Total
Assets
Investments in Group Trust,
at fair value $912,069 $ 1,370,100 $ 110,344 $ 1,480,444
Participant loans receivable 6,925 21,516 15 21,531
-------- ----------- --------- -----------
Total investments 918,994 1,391,616 110,359 1,501,975
Company contributions receivable 656 - 1,326 1,326
Employee contributions receivable 1,282 - - -
Loan interest receivable - - 3 3
-------- ----------- --------- -----------
Total assets 920,932 1,391,616 111,688 1,503,304
-------- ----------- --------- -----------
Liabilities
Payables for investments
purchased and other - - 4 4
-------- ----------- ---------- -----------
Total liabilities - - 4 4
-------- ----------- ---------- -----------
Net assets available for benefits $920,932 $ 1,391,616 $ 111,684 $ 1,503,300
======== =========== ========== ===========
The accompanying notes are an integral part of these financial statements.
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Lucent Technologies Inc.
Long Term Savings and Security Plan
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 2002
(Thousands of dollars)
--------------------------------------------------------------------------------
Participant Non-Participant
Directed Directed Total
--------------------- ---------------------- ----------------------
Additions to net assets attributed to
Contributions
Employee contribution $ 22,688 $ - $ 22,688
Company contribution 5,650 3,099 8,749
Participant loan repayments (49) 49 -
Interfund transfers of participants'
balances, net 22,313 (22,313) -
Transfers from Lucent Savings Plan, net 1,797 - 1,797
Interest from participant loans 873 7 880
--------- ---------- ---------
Total additions 53,272 (19,158) 34,114
--------- --------- ---------
Deductions from net assets attributed to
Distributions to participants 191,852 9,466 201,318
Plan's share of Group Trust investment
loss 192,810 64,595 257,405
Transfers to Agere Systems Inc.
Represented 401(k) Plan, net 114,392 16,588 130,980
Transfer to the OFS Long Term Savings
Plan, net 23,833 1,870 25,703
Transfers to other plans, net 1,046 - 1,046
Participant loan issuance (7) 7 -
Administrative expenses 30 - 30
--------- --------- ---------
Total deductions 523,956 92,526 616,482
--------- --------- ---------
Net decrease (470,684) (111,684) (582,368)
Net assets available for benefits
Beginning of year 1,391,616 111,684 1,503,300
--------- --------- ----------
End of year $ 920,932 $ - $ 920,932
========= ========= ==========
The accompanying notes are an integral part of these financial statements.
-6-
Lucent Technologies Inc.
Long Term Savings and Security Plan
Notes to Financial Statements
--------------------------------------------------------------------------------
1. Plan Description
General
The Lucent Technologies Inc. Long Term Savings and Security Plan (the
"Plan") is a defined contribution plan established as of October 1,
1996 by Lucent Technologies Inc. ("Lucent" or the "Company") to provide
a convenient way for most non-management employees (e.g., employees
whose pay is not defined at a monthly or annual rate and whose wages
are subject to automatic wage progression) to save on a regular and
long-term basis. In connection with the separation of the Company from
AT&T Corp., the assets and liabilities of the AT&T Long Term Savings
and Security Plan (the "AT&T LTSSP") which related to the Company's
employees and retirees were transferred to the Plan, effective October
1, 1996. The Plan's assets and liabilities were subsequently
transferred to a group trust (the "Group Trust") managed by Fidelity
Management Trust Company (the "Trustee"), effective January 1, 1997.
The Group Trust consists of the assets of the Lucent Savings Plan
("LSP") and the Plan.
On April 2, 2001, the Company consummated an initial public offering as
part of its plan to divest its microelectronics business, Agere Systems
Inc. ("Agere"). The Company completed a subsequent spin-off of its
remaining ownership interest in Agere by distributing a dividend of
Agere common stock to its shareholders on June 1, 2002. The assets of
the Plan which related to Agere employees totaling $130,980,000 were
transferred to the Agere Systems Inc. Management 401(k) Plan during
2002. Participant balances and participant loans receivable of
$130,229,000 and $3,919,000, respectively, were transferred to the
Agere plan on January 1, 2002. Additional true-up related net transfers
from the Agere plan totaling $3,168,000 were also processed during
2002. Participants holding shares of Lucent common stock on May 31,
2002 received a spin-off dividend of Agere Common Stock Class A and
Agere Common Stock Class B. Agere shares received attributable to
Lucent shares held in the Lucent Employer Stock Fund, were unitized and
placed in the two new Agere Stock Funds, established on June 1, 2002.
No contributions or transfers in will be permitted with regard to these
new funds.
Agere shares received, attributable to Lucent shares held in the
Employee Stock Ownership Program ("ESOP"), were sold and the proceeds
were used to purchase additional Lucent stock. The former ESOP was
designed to invest primarily in Lucent stock for the purpose of making
Company contributions on behalf of its participants.
On November 16, 2001, Lucent's optical fiber business was sold to The
Furukawa Electric Co., Ltd. The assets of the Plan which related to
these optical fiber business employees were transferred to the new OFS
Long Term Savings Plan.
The Plan is summarized in the Summary Plan Description ("SPD") which
has been distributed to all participants. For a complete description of
the Plan, participants should refer to the plan document. The Plan is
subject to the provisions of the Employee Retirement Income Security
Act of 1974 ("ERISA").
Eligibility
An eligible employee (generally an active employee with at least six
months of service or an employee who meets the requirements for
immediate eligibility) enters the Plan by authorizing a payroll
contribution and directing a contribution among the different funds of
the Plan.
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Lucent Technologies Inc.
Long Term Savings and Security Plan
Notes to Financial Statements
--------------------------------------------------------------------------------
Contributions
Employee contributions may be authorized from pay on the basis of
weekly pay in $5 increments as defined in the plan document. A
supplementary contribution may be authorized, if desired, consisting of
a total of one or more $5 increments which, when added to the
employees' matched contribution, results in a total contribution of up
to approximately 16% of the employee's weekly rate of pay. An employee
may designate contributions as pre-tax contributions, after-tax
contributions or a combination of pre-tax and after-tax contributions
in $5 increments. The Internal Revenue Code ("IRC") limited the maximum
amount of an employee's contribution on a pre-tax basis to $11,000 and
$10,500 in 2002 and 2001, respectively.
Previously, after completion of one year of service, the Company
contributed Lucent stock on behalf of each of its participating
employees in an amount equal to 66-2/3% of the lesser of the amount
actually contributed or up to the first 6% of the participant's
eligible compensation, as defined. Effective May 15, 2002, Company
contributions were no longer restricted to Lucent stock. Contributions
can be made in cash and invested in accordance with respective
participant elections. In addition, participants may elect to transfer
all or a portion of past Company contributions from the non-participant
directed funds to participant directed funds. All participant
contributions and earnings are immediately vested and are not subject
to forfeiture. Company matching contributions are vested upon the
completion of five years of service or upon the occurrence of certain
prescribed events (i.e. death or disability), regardless of years of
service. Company contributions will not be made with respect to
supplementary contributions. Company contributions and related earnings
in which a terminated participant is not vested are forfeited to the
Company. These forfeitures can be used to reduce future Company
contributions. At December 31, 2002 and 2001, forfeited amounts totaled
approximately $67,000 and $116,000, respectively.
Participant Loans
Loans are available to all active participants in an amount not less
than $1,000, up to a maximum of the lesser of $50,000 or 50% of the
participant's vested account balance. Upon default as defined in the
plan document, participants are considered to have received a
distribution and are subject to income taxes on the distributed amount.
Loan terms are between 12 and 56 months. The loans are collateralized
by the balance in the participant's account and generally bear interest
at the prime rate at the time the loan was originated. Interest rates
on outstanding loans ranged from 4.25% to 9.5% at December 31, 2002.
Principal and interest are paid through payroll deductions, coupon
remittances and electronic fund transfers.
Distributions
When a participant retires with a service pension from the Lucent
Technologies Pension Plan or terminates employment because of
disability, the entire vested amount in the participant's account can
be distributed, at the participant's election, in a single payment or
in retiree withdrawals as directed by the participant. If no
distribution election is made by the participant, the balance in the
account will remain in the Plan until a later date but not beyond age
70-1/2. When a participant dies, the entire amount in the participant's
account is transferred to the participant's beneficiaries.
In the case of other termination of employment (where the participant
is not entitled to retire on an immediate pension or does not terminate
because of disability), a single distribution can be
-8-
Lucent Technologies Inc.
Long Term Savings and Security Plan
Notes to Financial Statements
--------------------------------------------------------------------------------
made of all vested amounts in the participant's account. However, if
the participant does not request the distribution, the participant's
account shall remain in the Plan and shall be distributed only at (1)
the participant's request, (2) when the participant attains age 70-1/2
through the payment of Minimum Required Distributions, as defined in
the SPD, or (3) upon the participant's death, whichever is earliest.
2. Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan are prepared under the accrual
method of accounting.
Payment of Benefits
Benefits are recorded when paid.
Valuation of Investments
The net asset value of the Plan's proportionate share of the Group
Trust is calculated by the Trustee. The Trustee determines fair value
of the Group Trust's underlying assets in the investment manager
portfolios, taking into account values supplied by a reputable pricing
or quotation service or quotations furnished by one or more reputable
sources, such as securities brokers, dealers or investment bankers,
mutual fund administrators or other relevant information. Investments
in registered investment companies are stated at fair value as
determined by quoted market prices. Investments in Lucent common shares
and other securities listed on a national stock exchange are carried at
fair value determined on the basis of the New York Stock Exchange
closing price on December 31. Securities traded in over-the-counter
markets and government obligations are carried at fair value based on
the last bid prices or closing prices on December 31, as listed in
published sources where available and, if not available, from other
sources considered reliable. Contracts with insurance companies and
financial institutions, which are fully benefit responsive, are carried
at contract value (representing contributions made under the contracts
plus accumulated interest at the contract rates), which approximates
fair value. All other investments are carried at their fair value at
the close of business on December 31 as determined by the Trustee.
Participant loans receivable are valued at cost which approximates fair
value.
Purchases and Sales of Investments
Purchases and sales of investments are recorded on a trade-date basis.
Plan's Share of Group Trust Investment Loss
The Plan's reported investment loss from Group Trust presented in the
statement of changes in net assets available for benefits represents
its interest in the Group Trust's investment loss, which consists of
the Group Trust's interest, dividends and net depreciation in fair
value of investments. The Group Trust records dividend income on
investments held as of the ex-dividend dates and records interest
income on the accrual basis. The Group Trust's net depreciation in fair
value of investments consists of the net realized gains (losses) and
the unrealized appreciation (depreciation).
Transfers to Other Plans, Net
The Plan presents in the Statement of Change in Net Assets Available
for Benefits the net amount of transfers to other plans.
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Lucent Technologies Inc.
Long Term Savings and Security Plan
Notes to Financial Statements
--------------------------------------------------------------------------------
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, and changes therein, and disclosure of contingent assets
and liabilities. Actual results could differ from those estimates.
Risks and Uncertainties
Investments held by the Group Trust and the Plan are exposed to various
risks, such as interest rate, market and credit. Due to the level of
risk associated with certain investment securities and the level of
uncertainty related to changes in the value of investment securities,
it is at least reasonably possible that changes in risks in the near
term would materially affect participants' account balances and the
amounts reported in the statements of net assets available for benefits
and the statement of changes in net assets available for benefits.
Derivatives
From time to time investment fund managers may use derivative financial
instruments including forward exchange contracts and future contracts.
Derivative instruments are used primarily to mitigate exposure to
foreign exchange rate and interest rate fluctuations as well as to
manage the investment mix in the portfolio.
Reclassifications
Certain prior year balances have been reclassified to conform to the
current year presentation.
3. Tax Status
The Internal Revenue Service has determined and informed the Company by
a letter dated January 14, 1998, that the Plan and related Group Trust
are designed in accordance with applicable sections of the IRC.
Although the Plan has been amended since receiving the determination
letter, the Plan administrator believes that the Plan is designed and
is currently being operated in compliance with the applicable
requirements of the IRC. Therefore, no provision for income taxes has
been made.
4. Termination Priorities
Although it has not expressed any intent to do so, the Company reserves
the right under the Plan to amend or terminate the Plan subject to the
provisions of ERISA. In the event of Plan termination, the Plan
provides that the net assets are to be distributed to participating
employees in amounts equal to their respective interests in such
assets.
5. Plan Expenses
Plan participants pay investment manager and trustee fees and share
certain other administrative costs of the Plan with the Company.
Investment manager and trustee fees are generally reflected in the
calculation of each fund's net asset value per unit.
-10-
Lucent Technologies Inc.
Long Term Savings and Security Plan
Notes to Financial Statements
--------------------------------------------------------------------------------
6. Group Trust Investments
The LSP and the Plan each have an interest in the assets of the Group
Trust. Investment income and the Plan's interest in the net assets of
the Group Trust are allocated based upon the respective participant
balances within each fund for each plan. The Plan's interest in the
Group Trust was approximately 14% and approximately 16% as of December
31, 2002 and 2001, respectively.
The following tables present the fair value of investments held by the
Group Trust as of December 31, 2002 and 2001 (in thousands):
December 31,
2002 2001
Investments, at fair value
Avaya Stock Fund $ 15,882 $ 94,113
Lucent International Equity Fund 167,949 239,736
Lucent Asset Allocation Income Fund 40,659 52,944
Lucent Asset Allocation Fund 2000 122,328 169,668
Lucent Asset Allocation Fund 2010 299,091 421,370
Lucent Asset Allocation Fund 2020 271,919 414,919
Lucent Asset Allocation Fund 2030 91,490 145,667
Lucent Asset Allocation Fund 2040 6,712 6,530
Lucent Employer Stock Fund - Common Shares 200,685 909,377
Fidelity Equity Index Fund 801,736 1,306,896
Fidelity Magellan Fund 682,036 1,160,317
Fidelity Equity Income Fund 390,283 593,916
Lucent Bond Fund 247,150 211,517
Fidelity Institutional Cash Portfolio 581,776 666,995
Lucent Growth Equity Fund 41,447 63,467
Lucent Self Directed Brokerage 46,047 48,702
Small Cap Fund 50,168 41,769
Agere Class A Stock 1,852 -
Agere Class B Stock 44,231 -
Lucent Employer Shares Fund I 6,134 32,102
Lucent Employer Shares Fund II 12,793 78,242
--------------- ----------------
4,122,368 6,658,247
Investments, at contract value
Guaranteed investment contracts 2,358,565 2,551,648
--------------- ----------------
Total investments $ 6,480,933 $ 9,209,895
=============== ================
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Lucent Technologies Inc.
Long Term Savings and Security Plan
Notes to Financial Statements
--------------------------------------------------------------------------------
Investment income for the Group Trust is as follows:
Year Ended
December 31, 2002
Investment Loss
Net depreciation in
fair value of investments $ (1,330,723)
Interest and dividends 24,840
----------------
$ (1,305,883)
================
Investments in the Group Trust include $.3 billion in stock, $1.5
billion in equity funds, $2.4 billion in guaranteed insurance
contracts, $1.0 billion in bonds, and $1.3 billion in mutual funds as
of December 31, 2002. Investments in the Group Trust include $1.1
billion in stock, $2.3 billion in equity funds, $2.6 billion in
guaranteed insurance contracts, $1.2 billion in bonds, and $2.0
billion in mutual funds as of December 31, 2001.
Investment loss in the Group Trust includes $.7 billion net loss
related to stock, $.4 billion net loss related to equity funds,
$.1 billion net gain related to guaranteed insurance contracts,
and $.3 billion net loss related to mutual funds.
7. Related Party Transactions
Certain Plan investments are shares of mutual funds managed by
affiliates of the Trustee and, therefore, these transactions qualify as
party-in-interest transactions.
The Group Trust and the Plan invest in shares of Lucent common stock.
8. Subsequent Events
Effective March 1, 2003, the Company amended the Plan to provide for
100% vesting of Company contributions upon completion of three years of
service.
-12-
Lucent Technologies Inc.
Long Term Savings and Security Plan
Schedule H, line 4i - Schedule of Assets (Held at End of Year)
As of December 31, 2002
--------------------------------------------------------------------------------
Name of Issuer and Title of Issue Description Cost Fair Value
Participant loans receivable* (Interest rates range from 4.25% - 9.5%) $6,924,781
* Party-in-interest
-13-
Lucent Technologies Inc.
Long Term Savings and Security Plan
Signatures
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Employee Benefits Committee has duly caused this annual report to
be signed on its behalf by the undersigned hereunto duly authorized.
LUCENT TECHNOLOGIES INC.
LONG TERM SAVINGS and SECURITY PLAN
Date: June 27, 2003 By: /s/ Raymond M. Goldberg
------------- -----------------------
Raymond M. Goldberg
Vice President - Human Resources
North American Region Operations
(Plan Administration)
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EXHIBIT INDEX
Exhibit
Number
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23 Consent of Independent Accountants
99 Certification, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002